Cointegration of Stochastic Multifractals with Application to Foreign Exchange Rates
The existing concept of cointegration applies to integrated processes (in the Box-Jenkins ARIMA framework) or processes with long-range dependence. These processes are assumed to display a monoscaling behaviour (such as that of a fractional Brownian motion). On the other hand, many turbulent process...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2000
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/soe_research/431 |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | The existing concept of cointegration applies to integrated processes (in the Box-Jenkins ARIMA framework) or processes with long-range dependence. These processes are assumed to display a monoscaling behaviour (such as that of a fractional Brownian motion). On the other hand, many turbulent processes are known to be intermittent, hence possess multiscaling characteristics. This paper develops a concept of cointegration for these stochastic multifractals. A model is suggested for testing for cointegration and applied to the exchange rates of three major currencies. |
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